Stanford Estates would ask that you view this guide as just that ‘a guide’ it does not represent any legal document or advisory booklet and cannot be constituted or used as a reference for proceedings of any kind.
How much can you afford?
It may sound simple, but firstly look at your budget, outgoings and what you can afford to pay in a monthly mortgage. This will decide what level of borrowing you can make and with the deposit you have saved, how much you can then afford. You must look around for a mortgage and take in all the different advice whether direct with a bank or through an Independent Financial Advisor. There are a number of different financial institutions which offer loans to people buying a property, for example, building societies and banks.
Many banks will be able to provide you with an ‘Agreement in Principle’, but be aware that this will be subject to references and survey on the property and doesn’t mean that Institution won’t change their mind and withdraw the offer.
Be aware that there are purchase fees that you should calculate for, these can include:
- Valuation fees & mortgage arrangement fees
- Stamp Duty Land Tax
- Land registry fees
- Local Authority searches
- Other fees charged by a Lendor or A Financial Advisor
- Solicitors Fees
- Removal expenses
For more information about the current levels of Stamp duty please go to: http://www.hmrc.gov.uk/sdlt/intro/rates-thresholds.htm#1
You should be aware that if you start the process of buying a property and then the sale falls through you may have already paid for a valuation or a survey. If the solicitor has started any legal work you may also have to pay for the work done.
How to find a property
There are a number of ways in which you could find a property to buy:-
- looking at the property pages in local newspapers
- contacting house building companies for details of new properties being built in the area
- looking on the internet
- using Estate Agents
Using an Agent would mean you would be able to keep yourself at an arm’s length throughout the transaction, and a good agent like Robert Stanford should provide you with an understanding and sympathetic ear through what can be a demanding and emotional experience. At Robert Stanford we endeavour to simplify this from the offer stage through to completion making your purchase an enjoyable and fulfilling process.
Deciding on a property
When you find a property you should arrange to look at it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example; for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer. However, it isn’t uncommon for a person to only have seen a property once before they move in.
Is the property Leasehold, Freehold or Commonhold?
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land – who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender.
In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.
A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.
If the property is commonhold, this means that you can buy the freehold of a flat and own common parts of the building jointly with the owners of other flats in the building (known as a commonhold association).
In commonhold a ground rent or service charge is not payable. However, a share of the commonhold association’s expenditure on maintenance, insurance and administration will be payable for the common parts of the building.
Making an offer
When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money. We will do our best to honourably guide you towards a figure representative of the condition of the property which would be fair to both parties.
All offers regardless of how low, by law, must be put to the Sellers. This is also the case if an offer has already been accepted by the Seller. The outcome of any offer you make should be confirmed to you in writing.
Under English & Welsh Law, any offer, even if in writing, does not mean that you are committed to the purchase and will be ‘Subject to Contract’
When the offer has been accepted
When your offer for the property has been accepted you will have to consider the following:-
- Whether a holding deposit is payable – see below
- arranging a mortgage – see below
- whether a survey is necessary – see below
- who will do the necessary legal work – see below
- whether you want to buy with someone else – see below.
Once the owners have accepted your offer the buyer may be asked to pay a small deposit to the estate agent. This is usually between £500 and £1000. It is meant to show that you are serious about going ahead with the purchase. As it is fully repayable if the purchase doesn’t proceed; at Robert Stanford we would prefer to see action over the mortgage and legal representation to show a buyer’s assertiveness with the purchase, therefore, we do not ask for holding deposits.
Arranging a mortgage
Once your offer has been accepted then your chosen Mortgage company will need to be informed and your Application process will begin in earnest. It is important for us as Agent and the Seller to see that you are making inroads with the application and we would normally expect that the Mortgage Valuation take place within 2-3 weeks. If you have not already begun to arrange a mortgage, you should start to do this now.
Whoever agrees to lend the money will want to have the property valued. This is to make sure that an appropriate price is being paid for the property and that the condition of the property is fair and representative of the value agreed. It is for the mortgage company and should not be viewed as a personal survey.
Arranging a survey
The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.
There are two levels of survey that you can choose between:-
- A full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition
- A ‘house/flat buyers report’ that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.
It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish.
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this.However, we would ask you to understand that an older property will never be in perfect condition and will not survey like a new build.
Choosing who is to do the legal work (Conveyancing)
The legal process of transferring the ownership of the property from the present owner to the buyer is known as Conveyancing. You should decide who you want to do the Conveyancing work. You can do it yourself – although this can be complicated and we would not recommend it – or you can:-
Use a solicitor
Most firms of solicitors offer a Conveyancing service. Although all solicitors can legally do Conveyancing we would advise that you choose a solicitor with whom this is their everyday work.
Use a Licensed Conveyancer (England and Wales only)
You can use a licensed Conveyancer to do your Conveyancing. Licensed Conveyancers are not solicitors but are licensed by the Council for Licensed Conveyancers.
You must check on the fees and get quotes from some relevant bodies. We would suggest that you steer clear from cheaper fees or internet based Conveyancers, as our experience of these is that the transaction can be delayed and more stressful. We would always recommend that you speak to the solicitor who will be dealing with your case before you instruct any firm. Also you should:
- check whether the figure quoted is a fixed fee or an hourly fee
- check that the figure includes stamp duty, search fees, land registration fees, expenses and VAT and get a breakdown of all the legal costs
- find out what charges, if any, will be made if the sale falls through before contracts are exchanged.
Steps in the legal work of buying a property
Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to seven weeks and from exchange of contracts to completion can take up to four weeks. However, if there are any problems the time taken may be longer.
Enquiries made by the solicitor or, licensed conveyancer
Once you have instructed the solicitor or, in England and Wales, a conveyancer, the seller’s legal representative draws up a contract which will eventually be signed by you and the seller. However, before the contract can be signed, your legal representative must make sure that there are no problems with the ownership of the property, rights of way, access, or future developments in the area that might affect the property. This is called ‘making enquiries and searches’.
Local Searches. These are enquiries made to the local authority about any matters which affect the property which involve the local authority, such as whether there is a compulsory purchase order on the property. Local searches also include questions about any proposed changes or development in the area that might affect the property such as roads, housing, shops. During the local search, the local Land Charges Register is also checked. This gives information about any matter which affects the property such as tree preservation orders, if it is a listed building or in a conservation area.
Enquiries made to the seller by your legal representative. These are a set of standard questions about the property, boundaries, neighbour disputes and fixtures and fittings that will remain in the property. There may also be additional questions that your legal representative thinks are necessary, such as the transferability of guarantees for any work done on the house, for example, a damp proof course.
Arranging to pay the deposit
Whilst your legal representative is making the enquiries, you should sort out how you will pay the deposit that has to be made when the contracts are exchanged. The amount of the deposit can vary depending on the Loan to Value on your mortgage, however, the usual amount paid on exchange is 10%, subject to contract.
If you are also selling a house, it is usually possible to put the deposit on the property being sold towards the deposit on the property you are buying.
Insuring the property
You should make sure that buildings insurance is arranged from the date of exchange, because once contracts have been exchanged you are responsible for the property. You may be able to get information on buildings insurance from your mortgage lender.
Exchange of contracts
The final contract between you and the seller is prepared when:-
- Your legal representative and you are satisfied with the final outcome of all the enquiries
- Any surveyor’s report has been received and any necessary action taken
- Your formal mortgage offer has been received
- The payment of the deposit have been made
- The date of completion has been agreed.
- You and the seller each have a copy of the final contract which you must sign. These signed contracts are then ‘exchanged’. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead. If you drop out, you will lose your deposit and could be liable for other losses incurred by the seller.
Following exchange you should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.
Completion of the purchase usually takes place about two to four weeks after exchange of contracts, although it can be earlier. On the day agreed for completion:-
- The mortgage lender releases the money
- The deeds to the property are handed over to your legal representative
- The seller must hand over the keys and leave the property by an agreed time.